Apple continues battle against price-fixing allegations in the United States.

Amazon is poised for a European e-book pricing victory over Apple. European Union regulators are expected to accept a settlement proposed by Apple and several e-book publishers in response to an alleged price-fixing scheme, even as Apple continues to fight US regulators.

Apple and publishers proposed the settlement to the EU in August, which would allow e-book retailers to charge whatever discounts they please for two years. This would allow Amazon to continue selling books at a discount via the old "wholesale model," therefore reducing e-book prices back to their previous $9.99 (or so) standard.

According to a source speaking to Reuters on Tuesday, the proposal is on the verge of approval by the EU. In addition to allowing retailers to sell via the wholesale model, Apple is also reportedly giving up its "most-favored nation" contract for five years—such a contract requires retailers to give Apple their best price whenever price changes happen. The four e-book retailers involved in the EU settlement are Simon & Schuster, HarperCollins, Hachette Livre, and Macmillan, and the settlement is expected to be announced next month.

A similar settlement has already been accepted here in the US, but without Apple's participation. The company argued in August that the settlement negotiated between the Department of Justice and e-book publishers was "fundamentally unfair" because it invalidated Apple's existing contracts without a trial.

"Apple has never participated in, encouraged, or sought to benefit from collusion. It has no objection to the Proposed Judgment’s bar on collusion," Apple wrote in a legal memo at the time. "But the Government proposes to go much further. It seeks to terminate and rewrite Apple’s bargained-for contracts before a single document has been introduced into evidence, before any witness has testified, and before the Court has resolved the disputed facts."

52 Reader Comments

Good. While I don't have a problem with MFN clauses (I don't like them much as a consumer, but I don't think they should illegal), the collusion was serious and I'm glad that the MFN gets stripped out for a few years, at least in Europe.

Can someone explain this to me? How come I go to Amazon (or similar eBook retailers) and see that the prices of a lot of eBooks are about the same, and sometimes more expensive than the retail hardcover? I was poking around a minute ago and this seems to be the case in quite a few instances. I ran across Bill O'Rielly's book Killing Kennedy (all things aside, I just clicked a random cover, really). In this case the eBook is more expensive than a physical hard copy. How is this so? An electronic file (no physical manufacturing), sent electronically (no shipping costs), and it costs more? I'm sure there is some value added material involved, but this doesn't make sense to me. How are eBooks in general not ripping people off to some degree? Just curious as I prefer physical books anyway and am unclear as to how the eBook market is modeled.

Can someone explain this to me? How come I go to Amazon (or similar eBook retailers) and see that the prices of a lot of eBooks are about the same, and sometimes more expensive than the retail hardcover? I was poking around a minute ago and this seems to be the case in quite a few instances. I ran across Bill O'Rielly's book Killing Kennedy (all things aside, I just clicked a random cover, really). In this case the eBook is more expensive than a physical hard copy. How is this so? An electronic file (no physical manufacturing), sent electronically (no shipping costs), and it costs more? I'm sure there is some value added material involved, but this doesn't make sense to me. How are eBooks in general not ripping people off to some degree? Just curious as I prefer physical books anyway and am unclear as to how the eBook market is modeled.

Edit: Clarity.

Basically, publishers have not really figured out how to price efficiently when they don't have a physical supply side to deal with. They tried to take the easy way with agency pricing and MNF scheme that Apple offered them, since then they wouldn't have to compete against each other and potentially shake up market share while they figured the new market out. That didn't work, so now they are still working on the wholesale model (which just won't work long-term) while they figure this technology thing out.

Eventually, they'll get it worked out, but there is going to be a lot of testing the marketplace with regard to e-book pricing schemes in the next few years. I wouldn't be surprised if the eventual thing looks more like a subscription model than a price per unit model, similar with what has happened in the other digital media industries.

Can someone explain this to me? How come I go to Amazon (or similar eBook retailers) and see that the prices of a lot of eBooks are about the same, and sometimes more expensive than the retail hardcover? I was poking around a minute ago and this seems to be the case in quite a few instances. I ran across Bill O'Rielly's book Killing Kennedy (all things aside, I just clicked a random cover, really). In this case the eBook is more expensive than a physical hard copy. How is this so? An electronic file (no physical manufacturing), sent electronically (no shipping costs), and it costs more? I'm sure there is some value added material involved, but this doesn't make sense to me. How are eBooks in general not ripping people off to some degree? Just curious as I prefer physical books anyway and am unclear as to how the eBook market is modeled.

Edit: Clarity.

Amzon can only buy ebooks direct from publishers. They can buy physical books from a number of sources, and sometimes those sources themselves are having warehouse clearing or other closeouts on backstock. Also, for some SELECT books, amazon will have sales that price a book below cost. They may be doing this to clear thweir own warehouse space for more profitable product, or just promotionally as stores often do.

Next, it;s about WHEN the eBook license was signed with an author, and the royalty differences between physical and print. Many authors who already had massivlely popular book series in print but no ebook clauses in their contracts were able to negotiate very favorable royalties on ebook licensing, well in excess (several fold) what they got paid in print. There was also a lot of legal overhead publishers had to go through both individually and in general overall creating contracts on both ends of that process for sale. Books are a thin margin business, and new editions/prints bear the overall one-time cost of such ventures, meaning a book that's been out for years does cost less than a brand new singned contract for new distribution of an ecopy, plus the pagination and formatting required to make that copy, potentially additional editing as well the author may demand/request for that "edition" In many cases it;s also not just the author, but thay allso have artwork royalties to work out.

Also, in reality, all things equal, an ebook costs about 15% less of MSRP than physical does. a $30 hardcover, we take about 30-40% off the top for wholesale markdown (the room to let resellers buy below and sell at MSRP to make their own profit). So, a $30 book is about $20 wholesale. About 15% of the $30 is printing costs and shippign combined, usually $3-5 a book tops. Warehousing is on the reseller, not the publisher. marketing, editing, design, legal fees, and royalties make up the bulk of the rest, and there's only $15 remaining, leaving a slim $2-3 profit per book for the publisher. Keep in mind, a lot of books they make are done on advnaces they never get back, or never recoup their diting costys in sales and are loss leaders, so publishing overall is an extremely thin margin business. If a book is selling MSRP for $30, that really means wholesale can;t be less than about $14 without the publisher taking a loss, this is the price they sell to everyone including amazon. Amazon selling that again for $9 means no other busines can compete and profit. This is generally looked upon as anticompetitive, and when someone has 90% of a market like Amazon, it;s illegal. Yet, we go after the companies who all logically decided the same conclusion, pricing that low would destroy thweir business and all their partners, so they forbade it and set minimum pricing. logical, not illegal unless done as a unified decision. There is zero proof of collusion, only proof they all had the samme idea: stop amazon killing their industry by making them play fair. Publishers each set their own wholesale prices individually, they just made sure noone could sell below wholesale period.

They also granded apple favored nation status, Something not illegal, used already in movies, music, appliances, and many electronics sales, and something apple is universally used to getting and has a long history of, nothing colluding their, just business as usual. however, combine the two, and regulators got wishy-washy. Why? Amazon is lining the pockets of many governments, and expanding jobs, and is thus immune to such anticompettivie chatter, and considered a favored son, and when it doesn;t like what it's competitors are doing, government moves on their bahalf to stop it. This is not about right/wrong between the publishers and apple, this is about Amazon paying government to guarantee it;s monopoly while promising prices to consumers that are IMPOSSIBLE to maintain long term. Once they have the true monopoly, they'll HAVE to raise prices, there is not choice. The "low price" amazon is claiming is artificial, and it;s using a lie as the basis for an argument to say apple is trying itself to artificially raise prices for profit. Apple doesn;t set the price whoever, the publisher still does... Apple gets a flat 30%, BnK gets 35%, nothing unfair about that either. This is all political BS, and it only has steam because amazon set an unrealisitc pricepoint, got consumers used to it quick, and now has consumer backing of a mindshare thinking $10 is correct (completely ignoring the fact it is in fact below the cost to license those cvopies, something noone in publishing or law actually questions).

The $9.99 "Standard" is still too high for a digital product. Still too greedy.

Greedy? how.

Phuysical printing costs of a hardcover are about $4. Shipping and handling and short term warehousing amount to less than $5 more. Resellers bear the bulk of long term warehousing and the 30-40% wholesale allowannce they take is the single largest cut from the MSRP. Take these 3 things out, and wholesale price is $14 or so for hardcovers. What's in the $14? typicvally only $3 profit for the publishing house. The rest is royalties, legal fees/contracts, editing costs, pagination costs, and advertizing.

A $30 book costs about $14. Selling it for $9 is unethical because the industry that makes it, the authors that contribute, and the other resellers who try to compete who don;t have multi-billion-dollar industries cannot afford to take a $4 loss selling product.

Each copy is not free, each copy still has 100% (or more) royalties due per copy, the editor gets a share, laweyers get a share, and the publisher gets a share.

now, I'll agree, if I buy a physical copy, and thus have a license, I think adding a DRM locked alternate copy to use on an ereader shoudl only be a couple bucks. But, buying a e-copy INSTEAD of the physuical book, nobody makes any money at $9. in fact, its exactly right. Amazon is selling at a loss, the publishers are selling at a loss, and Waldenbooks, Boarders, and several other bookselllers WENT BANKRUPT trying to compete. These things DO have a very easily calculated cost. It is above $9 for first runs. (later runs slowly come down in price, editing is reduced, legal fees are simpler, and voume and profits take over, but first run are priced where they are for a reason.

Can someone explain this to me? How come I go to Amazon (or similar eBook retailers) and see that the prices of a lot of eBooks are about the same, and sometimes more expensive than the retail hardcover? I was poking around a minute ago and this seems to be the case in quite a few instances. I ran across Bill O'Rielly's book Killing Kennedy (all things aside, I just clicked a random cover, really). In this case the eBook is more expensive than a physical hard copy. How is this so? An electronic file (no physical manufacturing), sent electronically (no shipping costs), and it costs more? I'm sure there is some value added material involved, but this doesn't make sense to me. How are eBooks in general not ripping people off to some degree? Just curious as I prefer physical books anyway and am unclear as to how the eBook market is modeled.

Edit: Clarity.

That's the precise reason why most of my reading is still done the old fashioned way. That and I like to own my books, not simply license them at the whims of the publisher and vendor.

Can someone explain this to me? How come I go to Amazon (or similar eBook retailers) and see that the prices of a lot of eBooks are about the same, and sometimes more expensive than the retail hardcover? I was poking around a minute ago and this seems to be the case in quite a few instances. I ran across Bill O'Rielly's book Killing Kennedy (all things aside, I just clicked a random cover, really). In this case the eBook is more expensive than a physical hard copy. How is this so? An electronic file (no physical manufacturing), sent electronically (no shipping costs), and it costs more? I'm sure there is some value added material involved, but this doesn't make sense to me. How are eBooks in general not ripping people off to some degree? Just curious as I prefer physical books anyway and am unclear as to how the eBook market is modeled.

Edit: Clarity.

Basically, publishers have not really figured out how to price efficiently when they don't have a physical supply side to deal with. They tried to take the easy way with agency pricing and MNF scheme that Apple offered them, since then they wouldn't have to compete against each other and potentially shake up market share while they figured the new market out. That didn't work, so now they are still working on the wholesale model (which just won't work long-term) while they figure this technology thing out.

Eventually, they'll get it worked out, but there is going to be a lot of testing the marketplace with regard to e-book pricing schemes in the next few years. I wouldn't be surprised if the eventual thing looks more like a subscription model than a price per unit model, similar with what has happened in the other digital media industries.

The physical supply side is less than 15% of the MSRP on a hardcover and about 20% of the MSRP of paperback. That's not the issue. people think making copies electronically is free. It;s not. There's not only per-copy royalties, commisions, and licensing to pay, plus the legal efforts to make the contract, which add up alone to about $6 a copy for the first few hundred thousand copies (it starts going down slowly after that), but most ebooks released for books that were previously published without electronic contract options, they had to go the the authors estate, tail between legs, and beg for e-rights, something most authors did not want due to very real at-the-time piracy reasons, and the royalties on many ebooks are several fold what they are in print.

Can someone explain this to me? How come I go to Amazon (or similar eBook retailers) and see that the prices of a lot of eBooks are about the same, and sometimes more expensive than the retail hardcover? I was poking around a minute ago and this seems to be the case in quite a few instances. I ran across Bill O'Rielly's book Killing Kennedy (all things aside, I just clicked a random cover, really). In this case the eBook is more expensive than a physical hard copy. How is this so? An electronic file (no physical manufacturing), sent electronically (no shipping costs), and it costs more? I'm sure there is some value added material involved, but this doesn't make sense to me. How are eBooks in general not ripping people off to some degree? Just curious as I prefer physical books anyway and am unclear as to how the eBook market is modeled.

Edit: Clarity.

Amzon can only buy ebooks direct from publishers. They can buy physical books from a number of sources, and sometimes those sources themselves are having warehouse clearing or other closeouts on backstock. Also, for some SELECT books, amazon will have sales that price a book below cost. They may be doing this to clear thweir own warehouse space for more profitable product, or just promotionally as stores often do.

One thing I'd add is that traditionally only 50-66% of printed books actually get sold in retail. The 2/3rds rate is roughly what maximizes profits on a title (higher sellthroughs result in less total revenue due to people not being able to find a book they want when they look for it). 50% is where many books end up because of poor estimation of sales levels and choosing to err on the side of optimism by publishers and volume discounts by printers for hitting size breakpoints that can make a larger print run desirable even if most of the extras end up being pulped 6 months or a year later.

Can someone explain this to me? How come I go to Amazon (or similar eBook retailers) and see that the prices of a lot of eBooks are about the same, and sometimes more expensive than the retail hardcover? I was poking around a minute ago and this seems to be the case in quite a few instances. I ran across Bill O'Rielly's book Killing Kennedy (all things aside, I just clicked a random cover, really). In this case the eBook is more expensive than a physical hard copy. How is this so? An electronic file (no physical manufacturing), sent electronically (no shipping costs), and it costs more? I'm sure there is some value added material involved, but this doesn't make sense to me. How are eBooks in general not ripping people off to some degree? Just curious as I prefer physical books anyway and am unclear as to how the eBook market is modeled.

Edit: Clarity.

There is no jsutification for it - the same goes for any digital-download media. Once the intial "master" is "packaged" there becomes near zero overhead - no shipping costs and so on. They only need maintain a single instance on a server someplace. Some revenue would theoretically go towards server - storage - maintenance - management - power - etc... but that cost would also be distributed across any other services or fees that are charged with other products (including hard copies).

The reality is that a direct digital download should be fractions of pennies on the dollar relative to a hard copy counterpart. As much as I dislike the system in general - Apple's App Store seems to touch close to this idea (not perfect) - charging less for software that in the past would have been ridiculously higher. (price history of Aperture went from $500 <hard copy> - now available for $80 <digital copy>)

Their music offering don't reflect this concept in the slightest - as the cost of an album from iTunes is in the same range as the physical copy from Best Buy.

Can someone explain this to me? How come I go to Amazon (or similar eBook retailers) and see that the prices of a lot of eBooks are about the same, and sometimes more expensive than the retail hardcover? I was poking around a minute ago and this seems to be the case in quite a few instances. I ran across Bill O'Rielly's book Killing Kennedy (all things aside, I just clicked a random cover, really). In this case the eBook is more expensive than a physical hard copy. How is this so? An electronic file (no physical manufacturing), sent electronically (no shipping costs), and it costs more? I'm sure there is some value added material involved, but this doesn't make sense to me. How are eBooks in general not ripping people off to some degree? Just curious as I prefer physical books anyway and am unclear as to how the eBook market is modeled.

Edit: Clarity.

Basically, publishers have not really figured out how to price efficiently when they don't have a physical supply side to deal with. They tried to take the easy way with agency pricing and MNF scheme that Apple offered them, since then they wouldn't have to compete against each other and potentially shake up market share while they figured the new market out. That didn't work, so now they are still working on the wholesale model (which just won't work long-term) while they figure this technology thing out.

Eventually, they'll get it worked out, but there is going to be a lot of testing the marketplace with regard to e-book pricing schemes in the next few years. I wouldn't be surprised if the eventual thing looks more like a subscription model than a price per unit model, similar with what has happened in the other digital media industries.

The physical supply side is less than 15% of the MSRP on a hardcover and about 20% of the MSRP of paperback. That's not the issue. people think making copies electronically is free. It;s not. There's not only per-copy royalties, commisions, and licensing to pay, plus the legal efforts to make the contract, which add up alone to about $6 a copy for the first few hundred thousand copies (it starts going down slowly after that), but most ebooks released for books that were previously published without electronic contract options, they had to go the the authors estate, tail between legs, and beg for e-rights, something most authors did not want due to very real at-the-time piracy reasons, and the royalties on many ebooks are several fold what they are in print.

Where are you getting these numbers from? I'm just curious because it seems a bit unreal that so many creators in other media (which frequently require a larger team and more technology) can price their digital goods well below $10 and make a decent profit, but that's impossible with books.

On a completely different note, it seems like the model for publishers themselves is inefficient in a digital age. Of all the costs mentioned, only advertising, cover-art, and possibly advances seem like they actually benefit the creators.

The $9.99 "Standard" is still too high for a digital product. Still too greedy.

Greedy? how.

Phuysical printing costs of a hardcover are about $4. Shipping and handling and short term warehousing amount to less than $5 more. Resellers bear the bulk of long term warehousing and the 30-40% wholesale allowannce they take is the single largest cut from the MSRP. Take these 3 things out, and wholesale price is $14 or so for hardcovers. What's in the $14? typicvally only $3 profit for the publishing house. The rest is royalties, legal fees/contracts, editing costs, pagination costs, and advertizing.

A $30 book costs about $14. Selling it for $9 is unethical because the industry that makes it, the authors that contribute, and the other resellers who try to compete who don;t have multi-billion-dollar industries cannot afford to take a $4 loss selling product.

Each copy is not free, each copy still has 100% (or more) royalties due per copy, the editor gets a share, laweyers get a share, and the publisher gets a share.

now, I'll agree, if I buy a physical copy, and thus have a license, I think adding a DRM locked alternate copy to use on an ereader shoudl only be a couple bucks. But, buying a e-copy INSTEAD of the physuical book, nobody makes any money at $9. in fact, its exactly right. Amazon is selling at a loss, the publishers are selling at a loss, and Waldenbooks, Boarders, and several other bookselllers WENT BANKRUPT trying to compete. These things DO have a very easily calculated cost. It is above $9 for first runs. (later runs slowly come down in price, editing is reduced, legal fees are simpler, and voume and profits take over, but first run are priced where they are for a reason.

You are wrong... A book costs whatever people are willing to pay above the manufacturing costs. Free market, remember? You said that it costs 3-4 for making + 4-5 for shipping hence base price would be $10... no publisher pays anything in advance to the author (unless the author is popular but then the profits are almost guaranteed) . As a matter of fact new authors have to pay to get their books printed/published in limited quantity as a trial run. Once they go over a set number of sold books, then the authors start getting royalties.

no publisher pays anything in advance to the author (unless the author is popular but then the profits are almost guaranteed) . As a matter of fact new authors have to pay to get their books printed/published in limited quantity as a trial run. Once they go over a set number of sold books, then the authors start getting royalties.

That's not universally true, I can say for a fact. Most large publishing companies offer an advance, because most authors still have bills to pay while they are writing whatever is going to be published. The advance is usually based on a formula that accounts for a standard royalty based on historical sales from similar books. While it's true that no-name authors in the fiction genre often break into the business via the self-publishing route, publishers do still in fact pay authors advances.

You said that it costs 3-4 for making + 4-5 for shipping hence base price would be $10... no publisher pays anything in advance to the author (unless the author is popular but then the profits are almost guaranteed) . As a matter of fact new authors have to pay to get their books printed/published in limited quantity as a trial run. Once they go over a set number of sold books, then the authors start getting royalties.

No! No! No! No! No reputable traditional print publisher will charge the author anything. "Money only goes one direction, from the publisher to the author" is the single biggest gate check for differentiating between a legitimate publisher from a self publication company with delusions of grandeur (or fraud*). Advances for new authors are normally small (only a few grand); and print runs are often too small to actually earn out the advance (unless sales justify a 2nd print run anyway) but royalties are computed and added against the advance from the first copy sold. Also, while the initial book might not be expected to earn out the advance; if after 2 or 3 books if you're not selling enough to cover the minimum advance the publisher won't publish anything else you write.

* To clarify; if you're doing a church cookbook or family history doing it with a PoD house like Publish America is fine. The problem comes from PoD companies promoting their services as a way to get into brick and mortar book stores. The no-returns-under-any-circumstances policies and people playing games with them have resulted in brick and mortar stores blacklisting the PoD companies years ago. AFAIK the big stunt behind this was one PoD company telling it's marks that they could get their books into retail by ordering their books from retailers and then cancel the order after it was delivered to the store because the no refund/return policy meant the store was stuck with it and the PoD house already got the money.

The physical supply side is less than 15% of the MSRP on a hardcover and about 20% of the MSRP of paperback. That's not the issue. people think making copies electronically is free. It;s not. There's not only per-copy royalties, commisions, and licensing to pay, plus the legal efforts to make the contract, which add up alone to about $6 a copy for the first few hundred thousand copies (it starts going down slowly after that), but most ebooks released for books that were previously published without electronic contract options, they had to go the the authors estate, tail between legs, and beg for e-rights, something most authors did not want due to very real at-the-time piracy reasons, and the royalties on many ebooks are several fold what they are in print.

All the per-unit costs you are talking about are contractually controlled and are completely subject to change as the entire industry (authors included) adapts to an electronic reality. Yes, some contracts are longer than others, and there will be switching costs associated with it, but these issues have been dealt with among other digital industries.

So after the wholesale model ruling expires in two years, and the MFN ruling expires in five years, what's to stop Apple from entering into these same arrangements with the publishers again?

That's my thinking as well. This doesn't seem to solve the problem but instead puts it off a specified amount of time.

I don't think the 5 year stay on "most favored nation" clause will solve anything, and EU knows it.

The problem with most favorite nation clause is that it basicly sets the minimum price anybody can sell a product. And no manufacturer can dictate to reseller at what price they can sell their products, according to EU law.

So a 5 year curfew won't solve the problem. Most favorite clause is illegal now, and will be illegal when that 5 years has gone.

Phuysical printing costs of a hardcover are about $4. Shipping and handling and short term warehousing amount to less than $5 more. Resellers bear the bulk of long term warehousing and the 30-40% wholesale allowannce they take is the single largest cut from the MSRP. Take these 3 things out, and wholesale price is $14 or so for hardcovers. What's in the $14? typicvally only $3 profit for the publishing house. The rest is royalties, legal fees/contracts, editing costs, pagination costs, and advertizing.

A $30 book costs about $14. Selling it for $9 is unethical because the industry that makes it, the authors that contribute, and the other resellers who try to compete who don;t have multi-billion-dollar industries cannot afford to take a $4 loss selling product.

Each copy is not free, each copy still has 100% (or more) royalties due per copy, the editor gets a share, laweyers get a share, and the publisher gets a share.

now, I'll agree, if I buy a physical copy, and thus have a license, I think adding a DRM locked alternate copy to use on an ereader shoudl only be a couple bucks. But, buying a e-copy INSTEAD of the physuical book, nobody makes any money at $9. in fact, its exactly right. Amazon is selling at a loss, the publishers are selling at a loss, and Waldenbooks, Boarders, and several other bookselllers WENT BANKRUPT trying to compete. These things DO have a very easily calculated cost. It is above $9 for first runs. (later runs slowly come down in price, editing is reduced, legal fees are simpler, and voume and profits take over, but first run are priced where they are for a reason.

Facts you seem to ignore in these rants you make in every thread on this topic -

- The DOJ already investigated Amazon. The results of that investigation were contained in the filings on this case. Amazon did nothing illegal, even when they had 90% of the ebook market in 2007/2008.- Amazon's ebook business was profitable from day one, and has never operated at a loss. That is FUD spread by publishers and apologists. Again, this was in the court documents and is a matter of public record.- Amazon has used loss leaders to drive traffic. Wal*Mart, one of the largest retail sellers of books in the world, does the same. This is not illegal nor unethical as long as books are not dumped, which neither has engaged in.- Amazon had nothing to do with the death of local booksellers. This is popular lore but unrelated to reality. Booksellers were going bankrupt in the 80's and 90's long before Amazon became a serious player in the space. Their killer was Borders and B&N. Amazon is, however, slowly destroying B&N, which has permitted a rise in local booksellers again, many of whom sell their wares directly on Amazon's website, competing directly with Amazon. Thanks to Amazon toppling the retail stranglehold of B&N/Borders, locals can thrive again.- There is nothing illegal or unethical about wholesale books, and in fact the vast majority of physical books are sold directly in this model.

I do, however, agree with you that books do not cost much to make physical. You are using hardbacks, but on a typical paperback its even less, as low as 10% of retail cover price. Its simply not a significant cost of doing business for the publishing industry. That does not, however, mean that ebooks are not overpriced, they should be priced roughly 10% beneath the cost of physical books...

You said that it costs 3-4 for making + 4-5 for shipping hence base price would be $10... no publisher pays anything in advance to the author (unless the author is popular but then the profits are almost guaranteed) . As a matter of fact new authors have to pay to get their books printed/published in limited quantity as a trial run. Once they go over a set number of sold books, then the authors start getting royalties.

No! No! No! No! No reputable traditional print publisher will charge the author anything. "Money only goes one direction, from the publisher to the author" is the single biggest gate check for differentiating between a legitimate publisher from a self publication company with delusions of grandeur (or fraud*). Advances for new authors are normally small (only a few grand); and print runs are often too small to actually earn out the advance (unless sales justify a 2nd print run anyway) but royalties are computed and added against the advance from the first copy sold. Also, while the initial book might not be expected to earn out the advance; if after 2 or 3 books if you're not selling enough to cover the minimum advance the publisher won't publish anything else you write.

* To clarify; if you're doing a church cookbook or family history doing it with a PoD house like Publish America is fine. The problem comes from PoD companies promoting their services as a way to get into brick and mortar book stores. The no-returns-under-any-circumstances policies and people playing games with them have resulted in brick and mortar stores blacklisting the PoD companies years ago. AFAIK the big stunt behind this was one PoD company telling it's marks that they could get their books into retail by ordering their books from retailers and then cancel the order after it was delivered to the store because the no refund/return policy meant the store was stuck with it and the PoD house already got the money.

Thanks for pointing this out, this is something that seems to get a lot of wannabe authors. So many aspiring authors are so desperate to get a book out with their name in large print that they are suckered by what has become a cottage industry of botique publishers fraudulently selling them on thier dream. The reality is they should be using Amazon, Smashwords or one of the other free publishing systems out there to gauge interest and potentially catch the eye of a real publisher(this is how 50 Shades got its start).

And unproven. At this point, it's still just the allegation of collusion.

If there's a trial, the facts will be established and judged. Until then, we should still adhere to "innocent until proven guilty" even for companies.

Why? My reading comprehension is above 8th grade level. The documents are out there. So is Jobs' biography. Innocent until proven guilty does not mean we have to be idiots about it. Virtually every major western government in the world thinks Apple and the publishers did something wrong, and three of the six parties involved already admitted they were colluding.

[The US Government] seeks to terminate and rewrite Apple’s bargained-for contracts before a single document has been introduced into evidence, before any witness has testified, and before the Court has resolved the disputed facts.

Am I the only person who has a massive problem with this? I don't see many people talking about it.

Surely it is illegal for the government to rewrite a corporation's contract against their will without even a court case?

Redo from start wrote:

I don't think the 5 year stay on "most favored nation" clause will solve anything, and EU knows it.

I don't understand that either. What is the point of a 5 year stay?

If a Most Favored Nation clause is legal in five years then surely it is also legal today?!

It makes no sense at all, either Most Favored Nation is legal or not. That is what the EU should be ruling on.

I don't like how the government (in both the EU and the US) is stepping in and telling people exactly how they have to run their business. It's not supposed to work that way, they are supposed to say "these things are illegal, don't do them. otherwise you're free to do whatever you want".

Redo from start wrote:

The problem with most favorite nation clause is that it basicly sets the minimum price anybody can sell a product. And no manufacturer can dictate to reseller at what price they can sell their products, according to EU law..

Are you sure those laws apply to ebooks though? That seems to be a stretch, apple is not a "reseller" and the publishers are not "manufacturers". Nothing is being purchased and then re-sold, and nothing is being manufactured. All apple does is provide payment processing and DRM services, for a percentage fee.

The price of digital goods is always set by the copyright holder. If that is illegal in the EU, it will have a big impact on many industries.

I think perhaps Most Favored Nation clauses should be illegal, but they haven't said that. All they have said is "this specific company has to change these specific clauses in their contract for five years, then they can put them back".

I'm never going to spend $9.99 for an e-book. As far as I'm concerned, that's price-gouging. When the prices come down to something reasonable, I'll buy. Until then, there's a ton of free and reasonably-priced e-books out there for the taking/buying & reading. I can't say that any of the hot, supposedly must-read e-books being published by the price-gouger brigade has grabbed me as a must-read.

That's the market and if people join me, the price will lower (barring collusion.) If people (who are not me) are a-okay with $9.99, prices will stay high. But as I said: there are a lot of books out there that are less than $9.99, and I'm hoping that those books get a lot of attention and make a lot of sales.

[The US Government] seeks to terminate and rewrite Apple’s bargained-for contracts before a single document has been introduced into evidence, before any witness has testified, and before the Court has resolved the disputed facts.

Am I the only person who has a massive problem with this? I don't see many people talking about it.

Surely it is illegal for the government to rewrite a corporation's contract against their will without even a court case?

Redo from start wrote:

I don't think the 5 year stay on "most favored nation" clause will solve anything, and EU knows it.

I don't understand that either. What is the point of a 5 year stay?

If a Most Favored Nation clause is legal in five years then surely it is also legal today?!

It makes no sense at all, either Most Favored Nation is legal or not. That is what the EU should be ruling on.

I don't like how the government (in both the EU and the US) is stepping in and telling people exactly how they have to run their business. It's not supposed to work that way, they are supposed to say "these things are illegal, don't do them. otherwise you're free to do whatever you want".

Redo from start wrote:

The problem with most favorite nation clause is that it basicly sets the minimum price anybody can sell a product. And no manufacturer can dictate to reseller at what price they can sell their products, according to EU law..

Are you sure those laws apply to ebooks though? That seems to be a stretch, apple is not a "reseller" and the publishers are not "manufacturers". Nothing is being purchased and then re-sold, and nothing is being manufactured. All apple does is provide payment processing and DRM services, for a percentage fee.

The price of digital goods is always set by the copyright holder. If that is illegal in the EU, it will have a big impact on many industries.

I think perhaps Most Favored Nation clauses should be illegal, but they haven't said that. All they have said is "this specific company has to change these specific clauses in their contract for five years, then they can put them back".

Ignoring the matter that the laws in question are in Europe, so due process is likely a bit different, there are lots of situations where a government can invalidate a contract.

In this case, the second party (publishers) in the contract have already admitted to the contract being based on illegal arrangements, thus invalidating their side of the contract. Secondly, consider the instances where government intervention against one party would inherently dissolve a contract. For example, Samsung has a contract obligating them to sell a certain phone model in certain quantities to let's say Sprint. Now Apple files a complaint with the FTC prohibiting the import of that model. The contract dissolves naturally as Samsung can no longer meet their end of the contract and as such, Sprint withdraws their exchange defined by the contract.

Apple has no claim to due process as the governments in question can simply use the due process from the already admitted guilt to stop the publishers from meeting their contractual obligation.

The facts in the case are all but undisputed. I frankly hope Apple continues their tantrum throwing and winds up in court with heavy fines and sanctions.

One wants to become a monopoly; the other wants to deny it that status. Either model will remain flawed until you address the more fundamental problem in e-book pricing: the greed.

It is pure madness to ask the same price for an e-book as the equivalent paper-book yet nobody (among the customers) seems to mind it. The fact is that through e-publishing, writers/publishers can (easily) reach out to hundreds and thousands of more customers than they ever could (financially and even logistically) - and all this practically for free. This should have caused the prices of e-books to have easily been one tenth or even more that of the equivalent paper book. But that hasn't happened. They are not willing to back off on their greed. They want to enjoy the same high prices and at the same time incur next to nothing in costs in distribution and far-n-wide visibility.

Amazon, in their model, just retained the pricing themselves - and then they would randomly fluctuate the prices - from a few cents to $10 and above, etc. And as a user you are left to rely on your luck to time your purchase well and anticipate and follow the fluctuating price and hope to clinch a deal, etc.

Both models are about price fixing, stemming directly from the underlying greed to not price ebooks at their 'fair' price point.

Bottom line; while I may agree it may take $10 to publish an e-book and I will be willing to pay that price for that book; I can't accept that it takes the same $10 to publish that book in an e-book format. In other words, while $10 may be a fair price for a paper book, it is a rip-off price for an e-book.

There is no jsutification for it - the same goes for any digital-download media. Once the intial "master" is "packaged" there becomes near zero overhead - no shipping costs and so on. They only need maintain a single instance on a server someplace. Some revenue would theoretically go towards server - storage - maintenance - management - power - etc... but that cost would also be distributed across any other services or fees that are charged with other products (including hard copies).

The reality is that a direct digital download should be fractions of pennies on the dollar relative to a hard copy counterpart.

Yeah, but the master is amazingly expensive. Do you propose that some idiot should buy the master for a million dollars and the rest of us should buy subsequent copies at hosting costs? That's ridiculous! Cost+risk+profit have to be spread across all the sales.

About 15% of the $30 is printing costs and shippign combined, usually $3-5 a book tops. Warehousing is on the reseller, not the publisher. marketing, editing, design, legal fees, and royalties make up the bulk of the rest

Presumably paperbacks cost less to print than hardcovers, but let's take a look at a popular book and see how the pricing works out:

So even though there are NO PRINTING COSTS, the Kindle edition retail price is more than the paperback.

Quote:

and there's only $15 remaining, leaving a slim $2-3 profit per book for the publisher. Keep in mind, a lot of books they make are done on advnaces they never get back, or never recoup their diting costys in sales and are loss leaders, so publishing overall is an extremely thin margin business.

Last I checked, profit margin was computed based on wholesale price, not retail price. So, $2-$3 on a $20 whole sale price (your number) is 10-15% net profit on a brand new title. Meanwhile, large publishers also make even higher margins on their extensive back catalogs for which all editing, legal, and other costs have long ago been recouped. For those books, a copy at the wholesale price is all profit. Say, for example, A Confederacy of Dunces, originally published in 1987. Commonly used in high school and college literature courses, so that's a guaranteed 10k or so unit sales per year. No advertising, no editing costs, no legal fees.

Paperback: $10.20Kindle Edition: $9.60

Well, at least we save a whopping $.60 off the paperback price on that one. Does this pricing mean the royalties on this book are $6+ per copy? I find that a bit hard to believe.

Now let's look at a book that's in the public domain. Makers by Cory Doctorow. Anyone can go to the author's website and download a copy of this book for free.

Paperback: $6.00Kindle Edition: $9.99*

*with a friendly note from Amazon (or perhaps the author) that the ebook price was set by the publisher, MacMillan.

So to say there isn't price fixing going on here is a bit disingenuous in my opinion.

Sorry for my ignorance, but isn't an MFN clause GOOD for the consumer?

So regulators are going to remove the stipulation that the iBookstore price has to meet the lowest price. Because selling at thin margins or a loss isn't Apple's style, this effectively means that iBookstore prices are going up.

Sorry for my ignorance, but isn't an MFN clause GOOD for the consumer?

So regulators are going to remove the stipulation that the iBookstore price has to meet the lowest price. Because selling at thin margins or a loss isn't Apple's style, this effectively means that iBookstore prices are going up.

By punishing Apple, regulators seems to be saying "Buy it from Amazon, or pay 25% - 50% more anywhere else." How is this helpful?

(And am I completely wrong in my thinking?)

Yes.

Anyone can choose to compete with Amazon pricing. As the DOJ discovered, Amazon's ebook store was profitable from day one. What MFN did was mandate profit margins to Apple's satisfaction, and eliminate price as a competing factor between retailers. That is not consumer friendly.

Most favoured nations clauses don't really set minimum prices but maximum prices. As a long term mac user I've seen plenty of companies charge extra for the "mac" version, which for drives generally means a reformat and a sticker on the box. Knowing I'm not being charged more then elsewhere is a very attractive feature of an ebook store.

A good outcome out be the removal of the drm so that an open marketplace exists and that I am free to use whatever device is best. This is what the rulings should be trying to achieve, not set a specific business model on the industry.

I absolutely agree that people saying that ebook prices for new books should be a small fraction of the print price are not thinking through the various costs well. But there are still serious concerns with the current pricing strategy. Prices for ebooks should be slightly lower then the mass market paperback price for new books, and then steadily decrease in cost as time passes from the books original publication date. The ebook version of books released first only in hardcover still need to be based on the likely paperback price.

So the ebook prices should start at around $8 for books with a $10 paperback price and five years later most should have dropped in price to around $5. The price should not be fixed! And the price should never be the same or more than the print price, period!

Ignoring the matter that the laws in question are in Europe, so due process is likely a bit different, there are lots of situations where a government can invalidate a contract.

It's an international case, this article mentions both the US and EU side of it, and I think I was fairly clear which one I was referring to in various parts of my post.

aaronb1138 wrote:

In this case, the second party (publishers) in the contract have already admitted to the contract being based on illegal arrangements, thus invalidating their side of the contract.

Really? What have they done that is illegal? I must have missed that part of the story.

Also, if it is illegal, then why is this only a 5 year stay? Why have they been given permission to re-negotiate the exact same contract with Apple again in 5 years time?

aaronb1138 wrote:

Secondly, consider the instances where government intervention against one party would inherently dissolve a contract. For example, Samsung has a contract obligating them to sell a certain phone model in certain quantities to let's say Sprint. Now Apple files a complaint with the FTC prohibiting the import of that model. The contract dissolves naturally as Samsung can no longer meet their end of the contract and as such, Sprint withdraws their exchange defined by the contract.

That's fine, if there was actually a crime committed. I'm not convinced there was one.

The publishers are happy to sell their books at different prices in different stores. The most favoured nation clause was to stop publishers from selling a book for $9.99 on kindle, and $39.99 on iBooks. If it's going to be a cheap book on the Kindle, Apple wants it to be cheap on iBooks too. That seems perfectly fair to me.

It's no surprise the publishers are rolling over like a well trained puppy dog, but Apple is trying to get the government to actually demonstrate that there is something illegal in the contract.

aaronb1138 wrote:

Apple has no claim to due process as the governments in question can simply use the due process from the already admitted guilt to stop the publishers from meeting their contractual obligation.

The facts in the case are all but undisputed. I frankly hope Apple continues their tantrum throwing and winds up in court with heavy fines and sanctions.

Did you read the article? Apple said this:

Quote:

Apple has never participated in, encouraged, or sought to benefit from collusion. It has no objection to the Proposed Judgment’s bar on collusion

They are being accused of price collusion (in the US), and there is absolutely a dispute as to whether or not that actually happened. The government has made vague references as if they have strong evidence but Apple insists they had no part in any collusion and when they asked to see this evidence nothing at all was presented.

I want to know what they have actually done that is illegal. If that's the case, then by all means punish them. Charge them a $30 billion dollar fine, they can certainly afford it. But when the government starts accusing powerful executives of serious crimes and then doesn't present evidence (as the US government has done) or makes a big stink about so-called illegal activity and then says "just don't do it for 5 years, and then you can do it" (as the EU has done) then I start to get worried that government departments are stepping well and truly outside the boundaries that I, as an actively political citizen, feel they should be required to operate under.

Anyone can choose to compete with Amazon pricing. As the DOJ discovered, Amazon's ebook store was profitable from day one.

I hadn't factored that into my thinking. Thanks for pointing it out.

I still don't understand how this part:

reflex-croft wrote:

What MFN did was mandate profit margins to Apple's satisfaction, and eliminate price as a competing factor between retailers.

follows, especially in light of

lamda951 wrote:

Most favoured nations clauses don't really set minimum prices but maximum prices. As a long term mac user I've seen plenty of companies charge extra for the "mac" version, which for drives generally means a reformat and a sticker on the box. Knowing I'm not being charged more then elsewhere is a very attractive feature of an ebook store.

I can understand how an MFN clause in tandem with a back-room agency model agreement amounts to collusion. I get that. What I don't understand is why an MFN clause, by itself and agreed to out in the open, would be a bad thing. Let regulators put a hold on the agency model for ebooks, and leave the MFN clauses intact.

From the perspective of a consumer buying books, who happens to own an iPad, I want books from Apple to be as cheap as those from Amazon. An MFN clause accomplishes this.

I don't think the 5 year stay on "most favored nation" clause will solve anything, and EU knows it.

I don't understand that either. What is the point of a 5 year stay?

If a Most Favored Nation clause is legal in five years then surely it is also legal today?!

It makes no sense at all, either Most Favored Nation is legal or not. That is what the EU should be ruling on.

I don't like how the government (in both the EU and the US) is stepping in and telling people exactly how they have to run their business. It's not supposed to work that way, they are supposed to say "these things are illegal, don't do them. otherwise you're free to do whatever you want".

Redo from start wrote:

The problem with most favorite nation clause is that it basicly sets the minimum price anybody can sell a product. And no manufacturer can dictate to reseller at what price they can sell their products, according to EU law..

Are you sure those laws apply to ebooks though? That seems to be a stretch, apple is not a "reseller" and the publishers are not "manufacturers". Nothing is being purchased and then re-sold, and nothing is being manufactured. All apple does is provide payment processing and DRM services, for a percentage fee.

The price of digital goods is always set by the copyright holder. If that is illegal in the EU, it will have a big impact on many industries.

I think perhaps Most Favored Nation clauses should be illegal, but they haven't said that. All they have said is "this specific company has to change these specific clauses in their contract for five years, then they can put them back".

The price of digital goods is set by seller, not copyright holder, unless the seller is the copyright holder. EU law takes pretty dim view of anybody trying to enforce some kind of minimum price on goods. If seller is willing to sell goods at a loss, he has every right.

IANAL but to my knowledge only way for copyright holder to legally control the price a consumer pays for goods is for copyright holder to sell directly to consumers.

Here's an example of how strickt the law on price control is. A collectible mug manufacturer lowered how many units they shipped to retail stores that went below what they considered to be right price for the mugs. Didn't cut them off, just dropped how many units. They were fined for this.

I can understand how an MFN clause in tandem with a back-room agency model agreement amounts to collusion. I get that. What I don't understand is why an MFN clause, by itself and agreed to out in the open, would be a bad thing. Let regulators put a hold on the agency model for ebooks, and leave the MFN clauses intact.

MFN is anticompetetive. It you can't go under the apple price, there is no more price competition.